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Irish Whiskey - refusal to supply complaint not a priority for European Commission investigation

Irish Whiskey - refusal to supply complaint not a priority for European Commission investigation

The European Commission has rejected a complaint from Protégé International Ltd alleging that three Irish whiskey producers had agreed not to supply it with whiskey in breach of Article 101 of the Treaty on the Functioning of the European Union (TFEU) (Article 101 prohibits anti-competitive agreements between businesses). Protégé alleged that the refusal would lead to its exclusion from the market.

Protégé markets Irish whiskey under five whiskey brands in its "Wild Geese" Irish Whiskey range. Since 2002, it had procured whiskey through an exclusive supply agreement with Avalon Group, which in turn procured Irish whiskey from Cooleys Distillery plc. Cooleys was acquired by Beam Inc in January 2012 and then acquired by Suntory in April 2014. Cooleys/Beam Inc informed Avalon/ Protégé that it did not intend to prolong the supply agreement after its expiration on 1 July 2014. Protégé then asked two other companies (Irish Distillers Ltd and the Old Bushmills Distillery Co. Limited) to supply it with whiskey but each refused to supply for various reasons.

At the outset of its decision, the Commission emphasised its need to set priorities in dealing with competition complaints given its limited resources. While there are no set criteria for deciding which cases to pursue, the Commission may take into consideration: (i) whether it seems likely that further investigation will ultimately result in the finding of an infringement; (ii) the importance of the potential impact of the alleged infringement on the functioning of the internal market; and (iii) whether a national court or national competition authority could be well-placed to examine the allegations made. The Commission then turned to consider each of these factors.

Further investigation would be unlikely to result in the finding of an infringement

The Commission concluded that the likelihood of finding an infringement was limited because: (a) there was no indication that the refusal to supply by the three companies was the result of an agreement or concerted practice between them with a view to excluding Protégé from the market; (b) Protégé failed to provide any concrete evidence or even indication of an agreement between the three companies not to supply Irish whiskey to it; and (c) in the absence of any direct documentary evidence or indication of anticompetitive contacts between the three companies, it seemed unlikely that the decision of each company not to supply Irish whiskey to Protégé was the result of a concerted practice. The Commission further considered that the three companies seemed to have legitimate business reasons for refusing to supply Irish whiskey to Protégé. The Commission noted the rapid growth in the Irish whiskey market supported two of the whiskey company's assertions that they did not have capacity to supply whiskey to Protégé. The Commission also considered that the fact that competitors of Protégé were procuring whiskey from Beam and from Irish Distillers was difficult to reconcile with the allegation that the three companies agreed "to evict" Protégé from the market in order to limit competition.

The potential impact on the functioning of the internal market

The Commission considered that the subject matter of the Protégé complaint had only a limited impact on the functioning of the internal market. The Commission generally gives priority to cases which concern a number of member states or which present a strong cross-border dimension. The Ireland-focus of whiskey and the relatively limited trade volumes of Irish whiskey compared to total whiskey trading meant there was little internal market impact.

The Role of the Irish Courts and the Irish Competition and Consumer Protection Commission (CCPC)

The Commission considered that the Irish national courts and CCPC (which has replaced the Irish Competition Authority) appeared well-placed to handle the matters as the practices described in the complaint were essentially taking place in Ireland.

Conclusions

In exercise of its discretion to set priorities, the Commission concluded that there were insufficient grounds for conducting a further investigation into the alleged infringement(s) and accordingly rejected Protégé's complaint.

The decision amply demonstrates the obstacles that a complainant must overcome in order to persuade the Commission to deal with a competition complaint at EU level. It is notable that the Commission took just over two years from the date of the complaint to reject it. (Interestingly, the Authority received 186 complaints in the ten months in 2014 before its amalgamation with the National Consumer Agency to form the CCPC which indicates an increase in the number of complaints.)

Complainants would be well advised to first consider seeking redress at national level which may afford a speedier and more accessible forum for complaint handling. According to the Irish Competition Authority's 2014 Annual Report, it received 195 complaints in 2013.

Understandably, the CCPC uses a slightly different set of criteria to prioritise complaint handling namely the significance of the alleged infringement (and, in particular, its likely effect on consumers); the economic significance and strategic importance of the market involved; the likely impact of enforcement action by the CCPC; and the risk, resources and cost implications for the CCPC of taking enforcement action.

For further information please contact a member of our EU, Competition & Procurement Team.